# Home Work Module 7

My course is Accounting for healthcare.

Home Work Module 7

1. Assume that a not-for-profit company has \$20 million of long-term tax-exempt debt with an interest rate of 6.0%. The organization has \$3 million of unrestricted net assets, with an estimated cost of capital of 7.5%, and \$9 million in an endowment with an estimated 5.0% return on assets (cost of capital). What is its weighted average cost of capital?

My classmate work.

Assignment 7

Assume that a not-for-profit company has \$20 million of long-term tax-exempt debt with an interest rate of 6.0%. The organization has \$3 million of unrestricted net assets, with an estimated cost of capital of 7.5%, and \$9 million in an endowment with an estimated 5.0% return on assets (cost of capital). What is its weighted average cost of capital?

Calculation formula for WAC = Total Cost / Total Capital

Total Capital Interest Total Cost

Long term debt = 20 million x 6.0% = 1.2

Unrestricted net assets = 3 million x 7.5% = 0.225

Endowment or restricted assets = 9 million x 5.0 % = 0.45

32 million 1.875

Total cost = 1.875

Total Capital = 32 million WAC = 0.05859 = 5.86

https://www.wallstreetmojo.com/weighted-average-co…